Labour's £500 council tax sting for average family

The true extent of how much council tax has soared under Labour was laid bare last night.

An average family will soon be paying £500 a year more than they would have had rises been kept in line with inflation, it was claimed yesterday.

The figures were revealed after Whitehall released details of the funds the Treasury will give to local authorities next year.

The settlement - which determines how much council tax will increase in April - was greeted with fury by local government leaders.

They protest that the £70.4billion they will receive in 2008 will not cover the extra burdens councils have to carry.

Local authorities have pressed for and failed to get a £250million contingency fund to pay for school places, social services, rubbish collection, extra fire and police cover, and translation for immigrants.

They said that, as a result, the average increase in council tax will be 4.5 per cent, more than twice the level of inflation.

This will be enough to push a bill for an average family up by £50 to £1,150 a year. That will be more than double the average council tax bill of £564 when Gordon Brown became chancellor in 1997.

Ministers confirmed the likely scale of the council tax rises due next spring by saying they expected local authorities to set increases 'substantially below' the five per cent mark.

Town halls will take the announcement as a signal that those who raise their bills by less than five per cent are unlikely to find their spending capped by Whitehall.

Accountants Grant Thornton said the new figures mean council tax will be expected to raise £24.9billion - £12.7billion more than would have been produced by the tax had it gone up in line with inflation in the years since 1997, when Labour came to power.

Divided between the 25million homes in Britain, the figure means each household must pay an average of £10 a week to meet the extra demand for cash for town halls.

Maurice Fitzpatrick of the accountancy firm said: "The real increase in council tax under Labour is set to be £10 a week per household on average.

"This is the equivalent of over three pence on the basic rate of income tax."

Tories warned that annual increases of around five per cent - the level the Government has enforced since huge hikes in 2002 and 2003 made local taxation a deeply sensitive political problem - mean benchmark Band D bills will hit £1,500 by the time of the next General Election.

But the higher bills will not mean an improvement in services, councils have warned. Instead they predicted cuts, particularly in home help for the elderly and household rubbish collections.

The Local Government Association which represents councils spoke of 'tough choices between spending cuts and council tax rises above inflation.'

The scale of next year's bills was set yesterday in the local government finance settlement from Hazel Blears's Department for Communities and Local Government.

This tells councils how much they will get from the Treasury next year.

Grants from central government make up about three quarters of everything local councils spend.

If the grants fall short of what town halls want, the gap has to be made up from council tax.

LGA chairman Sir Simon Milton said: "In certain parts of the country the money councils will receive, when faced with the increased pressure on their services, will make it the worst settlement for a decade.

"The impact across England will vary as there is no one-size-fits-all, but in some regions local councils will have to make tough choices."

Tory local government spokesman Alistair Burt said the settlement for councils was a 'cunningly worded invitation to reduced services from councils and higher bills for taxpayers'.

Christine Melsom of the council tax protest group Is It Fair? said: "The Government are floundering over council tax.

"People are beginning to realise that as they pay more the services they get are in decline."

Local Government Minister John Healey said Treasury money for councils would go up by four per cent next year, 4.4 per cent in 2009/10, and 4.3 per cent in 2010/11.

He said: "This is a tight settlement but it is fair and affordable. We will not hesitate to use our capping powers as necessary to protect council taxpayers from excessive increases."

Some councils will get more of the pie and others much less, according to the Government's figures.

The losers are London boroughs, 27 of which will get just two per cent more next year than this year.

Shire counties in the South-East such as Essex and West Sussex will also get just two per cent and many district councils will receive just one per cent.